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 Posted: Mon Dec 28, 2009 7:09 am Post subject: Wanna know about Life insurance rider types and differences |
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Someone please tell me about the different types of life insurance riders. Are all LI riders alike?
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studOhio
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| Posted: Tue Dec 29, 2009 12:11 am Post subject: |
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There are several riders available on a life insurance policy. Some are very common, like waiver of premium, accidental death and dismemberment, and guaranteed purchase options.
There's a whole host of additional riders that could be available depending on the product and the company. |
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BNTRS
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| Posted: Tue Dec 29, 2009 7:00 am Post subject: |
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I guess this 'waiver of premium' would lower our insurance costs, but what about this 'guaranteed purchase' option?
I'm sure you'd help me with more info.
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studOhio
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| Posted: Tue Dec 29, 2009 11:45 am Post subject: |
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Waiver of premium increases insurance costs. Guaranteed purchase option increases insurance costs.
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Guest 1
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| Posted: Wed Dec 30, 2009 2:20 am Post subject: |
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All riders will have a cost. Waiver of premium has the insurance company pay your premiums if you become sick or injured and cannot work.
Guaranteed purchase options vary wildly by insurer, but the main idea is the ability to purchase additional insurance without medical proof of insurability at certain dates throughout the life of the contract. |
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BNTRS
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| Posted: Wed Dec 30, 2009 6:30 am Post subject: |
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The waiver of premium seems to be a real good protection under such adverse conditions. If someone goes through such health problems or gets injured then he'd be able to support his insurance claim with medical proof. I'm sure the doctor's certificate would clearly show the period for which he needs to be covered.
| Quote: | | but the main idea is the ability to purchase additional insurance without medical proof of insurability at certain dates throughout the life of the contract. |
Would such purchase of additional coverage offer benefits that are mandated by the insurer only? Is the insured allowed to apply for coverage as per his requirement?
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studOhio
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| Posted: Thu Dec 31, 2009 1:06 am Post subject: |
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I'm not sure what you mean by benefits mandated by the insurer or coverage as per his requirement.
The deal would be something like I buy a policy with a guranteed option rider for $150,000. I then have the ability during certain years to buy a policy up to $150,000 in face amount without providing medical information.
Sometimes when combined with a waiver of premium the insurance company will automatically exercise the increase options if you are permanently disabled. |
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BNTRS
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| Posted: Thu Dec 31, 2009 6:13 am Post subject: |
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| I have a level term rider which attaches a fixed worth of term insurance with my permanent life insurance for a certain period. I've heard that such level term riders are some times even 5 times the death benefit offered by our permanent life policies. |
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roddick
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| Posted: Sat Jan 02, 2010 1:26 am Post subject: |
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The waiver of premium benefit is sometimes an ill-advised choice. It requires that the [bprimary ]insured[/b] be disabled according to definition for at least 6 months before it becomes effective. If a covered spouse or the premium payor who is not the primary insured becomes disabled and cannot pay the premiums, the waiver has no effect. Waiver of Premium is fairly costly and usually not available if the insured is 55 years or older at the time of application. It also terminates in most policies at age 65 (the age at which Social Security no longer classifies a person as disabled).
On the other hand, a waiver of premium is often highly recommended for insured persons who are (a) self-employed, (b) employed in occupations with a high risk of extended disability (law enforcement, firefighters, others), and (c) for insureds who engage in high-risk hobbies ("avocations"), but in both (b) and (c), the insurer may decline to offer the rider if the risk is too high.
Guaranteed purchase options (automatic increase, future purchase option) usually cost a few (or more than a few) dollars per month on top of the base premium, and are valuable only if one exercises some/most/all of the options. Otherwise, a person is paying something for nothing, enriching only the agent and insurer. And some riders have language that ends the right to purchase in the future if an option is not taken. As has been stated, a primary value is not having to prove insurability to obtain the increases.
Other riders not previously mentioned include Long Term Care Insurance ($$) and terminal illness/accelerated death benefit riders (usually included at no cost). There are also disability income riders available ($$), and spouse/other insured and child riders ($$).
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MaxHerr
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| Posted: Sat Jan 02, 2010 6:10 am Post subject: |
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| Quote: | There are also disability income riders available ($$), and spouse/other insured and child riders ($$).
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The disability income rider is a great support which offers monthly income on a regular basis under circumstances when the policy holder gets permanently or completely disabled. It offers a specified worth of income either for the duration of disability or for the period mentioned in the rider. |
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steven
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| Posted: Mon Jan 04, 2010 4:53 am Post subject: |
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I'll take issue with the suggestion that waiver is an ill-advised choice. For some term carriers I would agree that their rates for WOP riders is high, but it would be tough to find a DI carrier that would cover an amount small enough on most term premiums. Odds of a disability are high and anyone who can qualify for the rider should be looking at it.
Now if the situation is such that disability of in the insured does not effect the ability of paying premiums (non working spouse as the insured) then waiver is likely not an approriate recommendation.
Statistically there is no point during your working life that death is more likely than disability. Risking both and losing your life insurance coverage because waiver of premium was "ill advised" or "too costly" would be a major blunder on both the agent's and client's behalf.
The depiction of GIO is also a little off. It's cost is generally very low, and there's no other way to secure insurability (outside of paid up additions in a whole life policy, but that goes beyond the scope of this discussion).
Ultimately the point of having insurance is about preventing the negative consequences of the unknown. Suggesting that GIO is only good if you anticipate purchasing additional insurance policies at or near the GIO limit for each exercise date follows that same logic I see a lot of people spew out about only making certain insurance purchases if you think something is going to happen. You don't know, you'll never know, and if you did the insurance industry would be bankrupt. |
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BNTRS
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| Posted: Mon Jan 04, 2010 11:35 am Post subject: |
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| Following an issuance of the initial policy, if the policy holder becomes uninsurable, he'd no more be eligible for additional insurance protection. Under such circumstances, these guaranteed purchase options or the guaranteed insurability riders would come to a great help for the policy holders. |
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JeremyHolter
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| Posted: Mon Jan 04, 2010 4:43 pm Post subject: |
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It depends on the situation on whether a rider makes sense or not. For instance, it doesn't seem to make much sense to put the waiver of premium on a cheap term policy while it does often make sense to put it on an expensive whole life policy.
I use GIO on children's policies because it can give a child the ability to purchase $1,000,000 of coverage as an adult. Howver, I rarely put it on an adult policy because it's often just as expensive as simply putting a term rider on the policy. Why give somebody the right to purchase more coverage when they can simply purchase more coverage for around the same cost?
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Guest 1
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| Posted: Mon Jan 04, 2010 11:14 pm Post subject: |
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| Quote: | | Why give somebody the right to purchase more coverage when they can simply purchase more coverage for around the same cost? |
Because they can purchase permanent insurance. However this question is missing the point. It wouldn't make sense purchase GIO if I needed additional insurance right now, it would make sense to purchase additional insurance, which I believe if the point you were making.
This, however, if not the point of GIO. GIO is a plan for future insurance needs that could be anticipated, I'm young and expect you have children in a few years, and the unanticipated e.g. we have another kid we didn't plan on having, spouse died and now I've think I need more insurance incase something happened to me (weird one I know but it happens a lot), and/or got a large promotion/new better paying job/make a lot more money than I ever thought I would need to buy more insurance. The Ormans and the Ramsey's of the world would tell us that last scenario simply requires some good investing and self insurance. It's next to impossible (although I'll admit not completely impossible) to self insure your future income stream. You'd need to somehow come up with the net present value of your future earnings. I know the so called "theory" of decreasing responsibility talks about the ability to do this as you get to the tail end of your working years when your level term insurance expires so you won't need it any more blah blah blah! I've never known anyone to get that to work correctly.
An old Massmutual tag line sums this whole conversation up really well. "You can't always predict, but you can always prepare." |
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BNTRS
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| Posted: Mon Jan 04, 2010 11:40 pm Post subject: |
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I'm talking about a term rider that is convertible. A term rider on a permanent policy is dirt cheap. It can be as cheap as the GIO.
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